Recently, banks have been focusing on "corporate finance." This has become important due to the financial authorities' ongoing stance on household loan management and the increasing risk of bad assets amid economic downturns, making the management of high-quality clients crucial at the beginning of the year.
According to the financial sector on the 24th, KB Kookmin Bank expanded its SME (corporate finance) branch headcount through regular personnel changes on the 10th. The SME branch head position oversees the corporate finance performance and marketing of the affiliated branch office, a role that previously had only one representative nationwide. Following this personnel change of 12 promotions and 3 reassignments, there are now a total of 15 SME branch heads across the country. These branch heads will work in regions where corporate finance is growing, as well as in state-led industrial complexes.
KB Kookmin Bank has recently received evaluations that its position in corporate finance is weaker than competitors. The bank is developing financial support programs aimed not only at large corporations but also at small and medium-sized enterprises and startups to regain its leading bank status.
Hana Bank is also focusing on corporate finance. CEO Lee Ho-sung has been fulfilling a schedule of visits to key corporations since taking office. Additionally, the bank has opened an artificial intelligence (AI)-based "corporate high chatbot" and established a new small business division to offer specialized loans for small and medium enterprises. It has also signed a business agreement with the Korea Trade Insurance Corporation to support liquidity for small and medium export companies through the "second export package preferential finance."
Woori Bank is also working to expand its corporate finance sector this year, similar to last year. Beginning this month, the bank plans to provide financial support totaling 500 billion won to import and export businesses. A key aspect is providing liquidity of up to 500 million won per company as "special management stabilization support" for import and export companies.
NongHyup Bank has launched a non-face-to-face corporate loan service that allows businesses to apply for loans and consultations without visiting a branch. Corporate clients without any transaction history with NongHyup Bank can easily apply for loan consultations through the mobile website without the need to open a separate account or sign up.
The reason that commercial banks are increasing corporate loans and strengthening corporate finance is that the growth of household loans is expected to continue to slow this year. With the ongoing tightening of household loan regulations by financial authorities, especially starting in July, the total debt repayment ratio (debt service ratio, DSR) phase 3 will be implemented. Given the situation, where household loan operations must be conservative, banks have no choice but to strengthen corporate loans. The judgment is that increasing quality assets through corporate loans will help expand interest revenue in the future.
A source from a major commercial bank noted, "While it is true that the expansion of household loans is limited, banks have no choice but to focus on corporate loans to grow this year. In particular, corporate loans are expected to lead to increases in not only deposits from employees' salary transfers but also in retirement pensions, personal loans, and other ancillary transactions, which tends to be very profitable for banks to increase.
However, unlike last year when they aggressively increased corporate finance, this year banks are expected to consider profitability more. Generally, household loans, particularly mortgage loans, reflect the least risk-weighted assets (RWA), while corporate loans reflect a relatively higher RWA due to collateral, industry, size, and volatility. Therefore, as this year's financial holding companies prioritize value enhancement, there is a growing trend to pursue appropriate growth in corporate finance while ensuring soundness, even with high RWA.
Another source from a major commercial bank stated, "While there is a need to increase corporate finance, banks are focusing on areas that are sound and yield high profitability rather than sheer volume. As corporate loans increase, both revenue and RWA will rise, but this year is focused on value enhancement, so there will likely be no dumping competition to increase market share."